Los Angeles wildfires; the reinsurance claims picture

The January 2025 Los Angeles-area wildfires were among the most destructive and costly in history. At least 29 people tragically lost their lives in the fires, and thousands more lost their homes or businesses.

Two major fires broke out in early January and burned for several days, forcing mass evacuation from the Palisades and Eaton districts. While the final economic, insurance and reinsurance losses are yet to be finalised, the total insured loss is estimated to be between $25 billion and $45 billion. The Palisades fire is likely to have resulted in insured losses of between $20 billion and $25 billion, according to Verisk, while the Eaton fire is estimated to have caused insured losses of between $8 billion and $10 billion. Total reinsurance market losses are expected to be in the low-double-digit billions.

The Palisades fire was the third most destructive in California’s history. The California Department of Forestry & Fire, known as CAL FIRE, reported that the Palisades blaze damaged or destroyed more than 6,800 structures.  Many of those homes were among the most expensive real estate in the United States – and indeed, the world – and several were architectural landmarks of historical significance.

The Eaton fire was the second most destructive ever to have taken place in the State, with almost 10,500 structures damaged or destroyed according to CAL FIRE.

In addition to the value of the buildings themselves, many millions of dollars’ worth of contents were lost in both the Palisades and Eaton fires, including collections of modern art, historically significant musical scores and equipment, rare books and antiquities.

Timing and location

While wildfire risk in California is not a new peril, the January 2025 fires were significant for their timing and for the specific areas affected.

Wildfires typically occur during the hot and dry summer months in California with the season beginning in June and usually ending in about October, after which cooler temperatures and rainfall lower the fire risk.
But according to the World Resources Institute, after a 2024 summer that saw record-breaking temperatures across the State, rainfall between October and January was only about 4% of the expected amount. The strong Santa Ana wind that blew in January also contributed to create conditions that exacerbated the risk of fires starting and spreading. In the period between January 7 and January 22, 2025, more than 200 fire alerts were detected in the Los Angeles area. In an average year no such alerts, which use satellite data to find fires based on the heat they generate, are detected in the first three months of the year.

The locations that were affected by the January 2025 fires contributed to the overall economic toll. The 2017 Tubbs and 2018 Camp and Woolsey wildfires, for example, caused insured losses of just over $11 billion and about $12.5 billion respectively, adjusted to today’s values, according to the Insurance Information Institute.

The 2017 and 2018 fires were deadly and destructive – at least 85 people tragically died in the Camp fire alone, while more than 50,000 were displaced. But those fires’ spread and track affected less populated areas and fewer high-net worth homes and properties, compared with January’s fires.

Adding to the overall insurance bill are the costs of accommodating families and individuals displaced by the fires. And the rebuild costs are likely to be affected by price inflation, a scarcity of resources and supply-chain issues and a potential shortage of construction workers.

Advance payments, which our reinsurance policy wordings allow for, have helped cedants manage potential cashflow issues

Claims expertise

Recovery from the fires will naturally take some time. But reinsurers have worked quickly to support cedants and, in turn, their insurance clients.
Insurance claims payout times have been relatively quick, helped in part by the increased use of drone and geospatial technology to assess damage and reduce the strain on loss adjusters’ resources.

Advance payments, which our reinsurance wordings allow for, have helped cedants manage potential cashflow issues, meaning that they can receive payments from reinsurers quickly. This feature of the reinsurance partnership with cedants has become more commonplace in recent years and streamlines the reinsurance claims process in a more efficient way to support cedants facing large losses.

The value of reinsurance lies in our promise to pay valid claims. Events like the California wildfires highlight the ways in which reinsurance claims expertise comes to the fore in helping cedants to manage their way through large and sometimes unprecedented loss events. Claims teams are ready to step up quickly and effectively to help cedants, and in turn their ultimate clients, to recover from catastrophic losses like the Los Angeles fires.